American Airlines' Terrible, Horrible, No Good, Very Bad Day

American Airlines suffered a terrible, horrible, no good, very bad day in the stock market on Friday, December 7, to paraphrase the title of Judith Viorst’s award-winning children’s book. On Friday, American plunged 9.1%, capping an equally bad week that saw the airline drop 16.4%.

As anyone with an internet connection and money in the stock market knows, last week was generally terrible and horrible. During the week of December 3 to December 7, 2018, the Dow dropped 4.5%, the S&P 500 4.6%, and the NASDAQ fell 4.9%, the biggest weekly percentage drop for all three indexes since March.

To be sure, Friday was a bad day for all the airlines, not just the leader, American. The sector suffered its worst decline since 2016, with United falling 5.16%, Delta 3.46, Southwest 4.18%, and Alaska 6.71%, according to CNBC.

Questions about the economy slowing and hence a decline in travel (particularly big-paying business travel) was a key concern. And although it seems paradoxical, falling oil prices may have also helped push the airlines down. As Tomi Kilgore of MarketWatch put it, “Lower oil prices lowers fuel costs for air carriers, but it also leads to undisciplined capacity growth that could hurt unit revenue performance.”

Analysts fear that low oil prices will tempt easily-swayed airlines to add more routes and planes, who will then indulge in old-fashioned fare wars. This may fill the planes but drown shareholders in red ink.

Such fears led Wolfe Research to downgrade the airline sector from Overweight to Underweight. But beyond fears of a recession, potential undisciplined spending, and general stock market malaise, are there deeper problems at American Airlines?

A trader works at the New York Stock Exchange in New York, the United States, on Feb. 5, 2018. U.S. stocks closed sharply lower, with the Dow plummeting 4.60 percent. (Xinhua/Wang Ying via Getty Images)Getty

Airline CEO Doug Parker was previously so confident that he made a bet with an airline analyst that the company’s stock would be over $60 on November 25, 2018. When the bet was made, in October, the stock was in the high 40’s. However, when the stock went the other way, Parker admitted defeat and said he will pay off the dinner and drinks bet. (AAL closed at 33.84 on December 10.)

Currently, of the 16 analysts following American, according to CNBC, five have a strong buy and nine have a buy on it. Only two have hold ratings, but the consensus Price Target for AAL is 48.39, about 25% below Parker’s $60 goal.

American Airlines CEO Doug Parker attends a ceremony to mark the opening of five new gates at O'Hare International Airport on May 11, 2018 in Chicago, Illinois. (Photo by Scott Olson/Getty Images)Getty

In addition to confusing Wall Street, American has apparently confounded its employees as well.

The Forward Cabin got a hold of an American employee survey. They found that only 26.4% had a favorable answer to the entry “Leaders at American Airlines make the right decisions that take care of our front-line team members” versus 51.3% of employees having an unfavorable rating.” Asked if “Leaders at American make the right decisions that support me,” employees gave only a 27.8% favorable rating, with 49.4% unfavorable.

Customers have been complaining as well, of issues like crammed planes, smaller seats, and rock-bottom service. Ben Schlappig of One Mile At A Time complains of constant delays and that on three of his last five American flights, the aircraft was “broken.” He ranted that American has “the operational reliability of a rickshaw.”

Luxury Travel Diary says American’s “improved” ultra-dense cabins on the 737 MAX have “a reduced seat pitch from 31 inches down to 30 inches so that they can fit in more seats. When seated, there is not enough space to open a laptop, the lack of space at head level makes you feel claustrophobic and if you sit on one of these seats for more than an hour or two, you may find that your back starts to hurt and your bum goes numb due to the lack of padding.”

Even AA flight attendants have complained of the tiny toilets on American’s new 737 MAX aircraft. So did all of these issues come to a head (ahem) last Friday?

While the stock was crashing, I was actually flying American on Friday morning. I found it an acceptable, if not delightful, experience.

I paid a great price for my ticket (good for me, bad for American and its stockholders) but was on a jam-packed Airbus A321 (bad for me, good for American.) Few of the 28 people on the upgrade list got their pre-holiday wish.

So when they asked passengers to check the roller bags they had been ready to carry on, I rushed up.

“Do I really need to check this?” I asked.

“What boarding group are you in?” said the gate agent.

“Five,” I said. There were nine boarding groups.

“Oh, you should be fine.”

Armed with his advice, I went carry-on, found an overhead bin and jammed myself into my seat. When the flight arrived on time I ran off the plane, probably saving a half an hour of waiting for my bag.

So I can't fully agree with the frustrated claim that "American's customer service culture is non-existent." These days, it’s the little things, like not checking my carry-on, that makes for a successful flight—and airline.

I've won several journalism awards, and my writing on travel has appeared in The Los Angeles Times, American Way, Southwest Airlines Spirit, Successful Meetings and United Hemispheres. At home in the middle seat, I've got a fistful of travel reward credit cards, have spent ...